Great Eastern Shipping Co. - In cruise control

Bharat Sheth doesn’t have the worries of Azim Premji or Nandan Nilekani and others like them. For the reclusive 49-year-old Deputy Chairman and Managing Director of Great Eastern Shipping (GESCO), one of India’s largest private sector shipping companies, employee attrition that plagues so many companies across industry has almost been an alien phenomenon: most of GESCO’s employees today have been with the company for at least five years. This is because, as analysts say, leaving GE Shipping and going to competition will be a stepdown for any individual. “It is one of the best companies in the industry and most individuals would always like to go for the best,” says an analyst from an Indian brokerage house.

That’s a fitting compliment to GESCO and its management that has nurtured the company into one of India’s best managed corporate entities today. The company’s revenues have grown 124 per cent over the last five years while net profit has risen more than 400 per cent. And the man largely responsible for all this is Sheth, who joined the company in 1981 at the age of 23, just after obtaining his Bachelor of Science (Economics) with honours from University of St Andrews, Scotland.

“Bharat is completely handson in the business on a day-to-day basis and knows exactly what is happening and the final decision lies with him. He is in full control of the business,” says an industry source who knows the Sheths. If sources are to be believed, Sheth never ever parties or even attends a shipping industry function unless there is a compelling reason to do so. He has left that part mostly to his father, K.M. Sheth, who is also the Executive Chairman of the company and guides its strategic and decision-making policies.

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Adds Syed Sagheer, an analyst with Pioneer Investments: “Right from the beginning, GESCO has been a professionally-managed company. Moreover, their management style is completely handson. Whenever the Sheths are not available, the senior management steps in to share information with analysts and investors.”

The company, one of whose key missions since inception has been to deliver long-term shareholder value through continued focus on global service, high safety standards and cost-efficient ship management, in 2006-07 recorded its highest-ever net profit of Rs 883.31 crore on a stand alone basis and Rs 912.43 crore on a consolidated basis, representing a return of 32.90 per cent after tax.

It’s not difficult, then, to see how GESCO has managed to pay dividend uninterrupted for the last 25 years. The average return on equity that the company has achieved over the last seven years is 29 per cent.

What makes Gesco tick? It has a strong management led by Bharat Sheth, who knows the pulse of the business It is a professionally-managed and transparent company It fosters employee loyalty by being the best in the industry It strives to deliver long-term shareholder value and profitability It focusses on global service, high safety standards and cost-efficient ship management

Analysts credit the company’s good performance over the years to its ability to contain risk by maintaining a fine balance between spot and long-term charters. According to a senior company official, the mix of spot and time charter helps avoid the volatility in the business and also manage risks very well. “The experience also counts. They know exactly when to buy an asset and when to dispose of an old asset, which is very important in the shipping business,” explains Sagheer.

Going forward, GESCO has huge fleet expansion plans. The company that set sail in 1948 with a single ship, Liberty, today has a fleet of 47 ships (34 tankers and 12 dry bulk carriers) aggregating 3.14 million dead weight tonnage (DWT). It has committed a capex of $589 million towards 12 new contracts aggregating another 0.85 million DWT. “We expect GESCO to be on a strong growth traction going forward, as it continues to add capacity,” says a report from investment firm SSKI. GESCO’s nascent offshore business Greatship (India), which has a committed capex of $667 million, is also expected to be a key growth driver.

Analysts predict exponential growth for its offshore business on account of increased exploration and production activity ($55-65 billion annually till 2011).

With Sheth at the helm, navigating the future growth path should not be difficult at all for GE Shipping.